[From Kwanghwamun] British malady vs Korean malady

In the 1970s, Britain`s economy was considered beyond repair. At the time, the American mass media deplored that the United Kingdom was drifting out of control. The nation was stricken with the so-called British malady, characterized by lax public enterprises, inflated trade unions, deteriorated financing and chronic strikes. At last, in the middle of the 1970s, the nation had to accept a bailout from the International Monetary Fund (IMF).

Until Margaret Thatcher took office and turned things around, the nation was in danger of foundering. Thatcherism was centered on the privatization of state-run enterprises, deregulation and the encouragement of competition and public sector reform. In the belief that private enterprises should be placed under the government supervision but public firms would be free from any outside interference, the British government put its policy priority on public sector reform. With the steady implementation of seemingly unpopular policies of selling off or consigning management of public enterprises and emasculating trade unions` power, the nation was able to overcome the economic crisis.

In the 1980s, the situation in the United States was not markedly different from that in Britain a decade earlier. The Wall Street Journal warned that the U.S. was stricken with the same illness as Britain.

American enterprises, which set the pace in the steel, automobile and other key industries until the 1960s, lost their competitive edge. As a result, large enterprises were obliged to impose massive layoffs. But the government failed to cut financial disbursements and consequently the economy suffered from huge deficits. As American assets were auctioned off to the Japanese, there was a rising sense that the ``American soul`` was being sold. Nevertheless, through thorough structural reform, the U.S. came to enjoy a great boom in the 1990s.

As for Japan during the same span, the nation that once dismissed the U.S. economy began to slide into an economic abyss of its own. In order to cope with its plight, the Japanese government adopted a series of policies to stimulate the economy which only served to increase the deficit. Finally, agencies in the United States downgraded Tokyo`s sovereign credit rating, despite the fact that Japan remains the world`s largest creditor nation. Warnings of a financial collapse ensued.

What is the current situation in Korea? An intriguing question is whether Korea is in danger of becoming a second Britain, if not a second Japan. And if Korea becomes a second Japan, what will be the end result?

In a recent report issued by Morgan Stanley Dean Witter and Co., a U.S. financial services firm, warned that Korea would not become a second Japan. The agency forecast that Korea could face another economic crisis in 2003.

For now, Korea has symptoms similar to those of Britain in 1970s, the U.S. in the 1980s and Japan in the 1990s. Most notable is the inefficiency of public enterprises, loss of industrial competitiveness, lower consumption and snowballing deficits. These make up the Korean malady.

It took more than 10 years for countries that have more favorable conditions to heal their economic diseases. Some countries have yet to regain their health, as in the case of Japan. Foreign financial experts point out that the Korean situation is worse than it was in other countries.

Korea should not be impatient in its bid to heal its economic malady. If half-baked policies are implemented, the situation will only get worse. The government ought to refrain from airing an optimistic view about the nation`s chances of rapidly overcoming the current economic downturn. On the other hand, the general public should not expect a hasty remedy. The people would be better advised to heed the government`s appeal to share the pain.

Park Young-Gyun parkyk@donga.com